Cryptocurrency analysis platform Arkham has published a noteworthy assessment of Strategy co-founder Michael Saylor’s Bitcoin position.
According to the analysis, Saylor is currently losing more than 10% compared to the average purchase cost. But the real question is whether this loss will force Strategy to sell Bitcoin.
Looking at the company’s balance sheet, Strategy’s two main financing instruments for generating cash stand out: preferred shares and convertible bonds. Strategy has approximately $2.55 billion in cash reserves to meet these obligations. The preferred shares include issues with the ticker symbols STRK, STRF, STRD, STRC, and STRE. These shares generally offer a dividend yield of 8 to 10 percent. However, these payments are not legally mandatory; the company can choose not to pay dividends if it experiences a cash crunch and therefore does not have to sell Bitcoin. Furthermore, share buyback decisions are entirely at the discretion of company management.
The main binding obligation lies in convertible bonds. Strategy reportedly has approximately $8 billion in debt in this category. These bonds must either be repaid on maturity or converted into shares at a specified price. The company’s current $2.5 billion in cash is theoretically insufficient to cover the entire debt. However, this does not automatically indicate a Bitcoin sale.
According to Arkham’s analysis, the first scenario is that bondholders exercise their conversion right. If Strategy shares trade above the conversion price on maturity, investors choose to convert their bonds into shares. Indeed, this mechanism was already in place for the 2027 bonds. If the share price falls below the conversion level, the company may resort to refinancing. Options such as selling new shares, issuing new convertible bonds, or issuing additional preferred shares are on the table.
However, if all these options fail, Strategy may consider selling a portion of its Bitcoin portfolio to finance bond repayments. At this point, the determining factors will be the Bitcoin price and the company’s ability to raise funds from the market. Therefore, the risk appears to be directly linked to Saylor’s financing flexibility, rather than its average cost.
Arkham also points out an important detail: Saylor’s past practice of selling common stock to buy Bitcoin doesn’t create a mandatory cash outflow for Strategy in the future. Therefore, the statement “Saylor is losing money” doesn’t mean the company will have to sell Bitcoin. Saylor could remain below its average cost for a long time; the critical threshold remains Strategy’s ability to roll over its convertible bonds.
*This is not investment advice.
